An Acronym for Santa Cruz Operation
Originally a company that distributed a version of Unix for the Intel x86 architecture called Xenix, bought from MicrosoftCorporation. Later they made another Unix version SCO UNIX System V/386. Their main market appears to have been relatively lightweight client PCs connecting to larger servers running a different flavour of UNIX. Their expensive software never became very popular, but their pricing structure fitted well with many consultants. In 1995 they bought UnixWare from Novell, which Novell had bought directly from AT&T, the original creators of UNIX. Their profits were being eaten alive by the growing popularity of Linux soon after however, and they made a few desperate moves to try this OpenSource thingamajic with little success.
In 2001, they were bought by Caldera, a Linux distributor that had repeatedly made big plans to establish their LinuxDistribution as part of the business world and had repeatedly failed. Caldera's hope was to benefit from the well established distribution channels SCO had built in over ten years of work. Well, chalk another one up for Caldera; the attempt failed. Desperate to make profits, they turned to the SCO products bought in with the acquisition, renaming themselves to The SCO Group. One more failure.
At this point, someone rememebered that they owned UnixWare, which meant ownership of the IntellectualProperty of the original AT&T UNIX. A plan was hatched to construe Linux as having been impossible to create without theft of IntellectualProperty from UNIX. The first one to get sued was IBM, who had paid licenses to use that IntellectualProperty for their AIX clone of UNIX, and later also invested (quite heavily) in Linux. The lawsuit is based on lateral interpretation of old legal documents. As if this wasn't ludicruous enough, they're also demanding money from users of Linux, which is completely devoid of any legal basis. (If someone plagiarises your song, you don't sue the people who bought his CD, do you.)
Let's hope this lawsuit is their ultimate failure.
There are heaps of resources on the web about this lawsuit. The one you don't want to miss is PiratesOfPenguinance?.
But see also:
There's a Google bombing campaign to associate them with the search term litigious bastards. At the time of writing they're the number #1 hit for that query. The MyDoom DDoS attack prompted DNS changes which caused www.sco.com to not resolve, but it is now back.